Digital Archive.... : 05/06/2012

Friday, May 11, 2012

Five reasons why Kenya and Africa should take off

Africa Can... - End Poverty

A week hardly goes-by without one or more international investors announcingmajor investment interests in Nairobi, or other African capital cities.

Nokia, Nestle, and IBM are some of the companies which intend to position themselves more strongly in (East) Africa. True, their investments may still be low by international standards, but they are increasingly becoming noticeable.

On a macroeconomic level, the new Africa momentum has also been evident. Africa has weathered both the global financial crisis, and the turbulence in the Euro zone. According to World Bank's latest economic outlook, Sub-Saharan Africa is projected to grow above 5 percent in 2012 and 2013. This would be higher than the average of developing countries (excluding China), and substantially, above growth in high-income countries. This means that at some point in this decade, Africa could grow above the levels of Asia. A few years ago, it would not have been possible for economic observers to consider such a scenario. Once Africa becomes the fastest growing continent in the world; this will also be the true turning point for Africa's global perception.

There are five reasons why Africa can become an emerging region over the next decade, and Kenya provides a good illustration of this. The first reason is external, while the others are domestic.

First, Asia is growing richer and is becoming more expensive. With an aging and more affluent population, Asia, especially China, will need to expand domestic demand and balance its economy away from exports. This will further raise the costs for production, which will lead to "the end of the China price", a term used by Pamela Cox, World Bank Vice President for East Asia, at this year's spring meetings. Other poorer countries can benefit from the end of the China price, mainly due to the fact that more than 85 million manufacturing jobs are expected to leave China in the coming decade. Will Africa get a big share it? Will Kenya be part of it?

Second, Africa will be the new demographic powerhouse of the world. All continents will grow older, and many economies will have a shrinking working population. Africa on the other hand is still young (as a matter of fact, it is also growing older, but from a very low base), and the working age population is rapidly expanding. As family sizes shrink and populations grow older, countries will experience a "demographic dividend", which occurs when the working age population exceeds the number of dependants, and continues to broaden.

For example, Kenya adds more than one million people per year to its population, and will reach an estimated 85 million by 2050. However, the number of youth (age 0-14) is expected to increase from 20 to 25 million, while that of adults from 22 million today, to 55 million in 2050. This is why rapid population growth is good for Africa, since fast growth is taking place for fundamentally different reasons, compared to the past; it is because people now live longer—not because they have more children.

Third is the geographic transition which is also connected to demography. Most African cities are still small, but growing rapidly; not least because rapid population growth by definition increases the density of countries. Studies show that doubling city size is associated with a productivity increase of an average of 6 percent. The key issue will be the management of these growing cities. Today, 30 percent of Kenya's population lives in cities. But going forward, this share will increase by about one percent per year, over the next several decades, which means that by 2033, half of Kenya's population will be urban. Geography should also work to Africa's advantage, because it is not far from key markets. The port of Mombasa is relatively close to India and Europe. In addition, Nairobi has already emerged as the region's transport and service hub.

Fourth, the expansion in education is paying off. Africans are better educated today than they were twenty years ago. Among the Millennium Development Goals, education is likely to be achieved. Kenya speaks the world's leading language—English—and the business community largely benefits from a good labor force. Since the introduction of free primary education, most Kenyan children are now going to school. Most of them know how to read and write, but the quality of education still needs improvement.

Fifth, economic policies have substantially improved. The 1990s was the decade of controversial structural adjustment. When I was traveling through Africa during that period, black markets were everywhere. Today they are exceptional. Compared to Europe, Africa's macroeconomic policies look excellent! For example, Kenya's debt level of around 45 percent of GDP would propel it to one of the top performers in the European Union.

Is this picture of an emerging Kenya and Africa too optimistic? Aren't the challenges still enormous? Isn't Africa still embroiled by war, drought, climate change, corruption… you name it? Yes, the challenges remain enormous. But look back ten to twenty years, and compare it to the present day. In countries like Kenya, Tanzania, Uganda or Rwanda almost all social and economic indicators are now better than in the 1990s. Even globally, think about it: A few years ago, who would have thought that it would be possible for someone in Kenya to have a face-to-face conversation with someone in another part of the world—for free! Thanks to modern communication, it is now possible.

There are still many local and global problems which need urgent solutions. Between now and 2050, an additional 2 billion people will join the world population, who can help to solve these problems; of these, every second person will be an African. There will also be 45 million more Kenyans. This new generation will grow up in a new world, and be better equipped to solve future challenges.

This is the second part of a speech I gave at the Annual Gala of to the Petroleum Institute of East Africa.

Follow me on Twitter: www.twitter.com/ @wolfgangfengler

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Malawi wisdom

Africa Works

After the sudden death, by heart attack, of Malawi's 78-year president, Bingu wa Mutharika, earlier this month, Malawians anxiously suffered several days of uncertainty. First, the government would not immediately proclaim the president dead. Having been flown to South Africa for medical attention, Mutharika seemed to have gone missing rather than ceasing to exist. The confusion, of course, was ultimately explained by the rules of succession in Malawi, which called for vice president, Joyce Banda, to assume executive power. Not only was Banda a women in a Malawi riddled with casual sexism and long traditions patriarchal behavior, she was also a critic of Mutharika, a former World Bank official who seemingly did the impossible in managing an economic revival but tarnished his reputation by displaying increasingly autocratic behavior.

Mutharika's death, then, had the potential to plunge Malawi, a small and oddly-shaped country in southern Africa that has often flirted with "state failure" over its 50-year history, into crisis. The question of whether Malawi should even be country — in colonial times Malawi, then known as Nysasland — was a thinly-populated British protectorate where a motley collection of whites and Asians controlled the economy, which mainly consisted of tobacco and tea growing. No less a central figure than Hastings Banda, the president of Malawi on its independence in 1964, questioned whether this long, thin and heavily-rural jurisdiction, should simply be rolled into its much larger neighbor, Zambia, which during British rule was known as Northern Rhodesia.

Doubts about Malawi's viability have never completely vanished and, during the first decade of the 2000s, when Malawi faced a serious of severe food shortages, questions again arose over whether Malawians ought to voluntarily be absorbed into either Zambia or land-rich Mozambique, neighbor to the east.

Under Mutharika, Malawi settled on a set of policies that reward small farmers, who receive inputs such as fertilizer at reduced prices. The policy contradicted the advice of international assistance experts but Mutharika wisely argued that these experts were the cause of Malawi's food shortages. He was proved right by Malawian farmers, who grew record amounts of corn under the stimilus of government buying programs. Indeed, Mutharika effectively nationalized the maize crop, repudiating free-market, neo-liberal agricultural policies that remain (sadly) the cornerstone of the international aid community's approach to African farming.

Mutharika's vanity, in the end, alienated a voting public that might otherwise have treated him as a hero. His death could have plunged the country into a new crisis, if his inner circle had refused to permit Joyce Banda's ascension to the presidency. Her path was not blocked and Malawi, for the moment, again seems like a nation that deserves to the world's admiration, if not Africa's. Hailed as a grassroots leader, Banda must stand for election in 2014.

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JP Morgan Debacle Reveals Fatal Flaw In Federal Reserve Thinking

The Baseline Scenario

By Simon Johnson

Experienced Wall Street executives and traders concede, in private, that Bank of America is not well run and that Citigroup has long been a recipe for disaster. But they always insist that attempts to re-regulate Wall Street are misguided because risk-management has become more sophisticated – everyone, in this view, has become more like Jamie Dimon, head of JP Morgan Chase, with his legendary attention to detail and concern about quantifying the downside.

In the light of JP Morgan's stunning losses on derivatives, announced yesterday but with the full scope of total potential losses still not yet clear (and not yet determined), Jamie Dimon and his company do not look like any kind of appealing role model. But the real losers in this turn of events are the Board of Governors of the Federal Reserve System and the New York Fed, whose approach to bank capital is now demonstrated to be deeply flawed.

JP Morgan claimed to have great risk management systems – and these are widely regarded as the best on Wall Street. But what does the "best on Wall Street" mean when bank executives and key employees have an incentive to make and misrepresent big bets – they are compensated based on return on equity, unadjusted for risk? Bank executives get the upside and the downside falls on everyone else – this is what it means to be "too big to fail" in modern America.

The Federal Reserve knows this, of course – it is stuffed full of smart people. Its leadership, including Chairman Ben Bernanke, Dan Tarullo (lead governor for overseeing bank capital rules), and Bill Dudley (president of the New York Fed) are all well aware that bankers want to reduce equity levels and run a more highly leveraged business (i.e., more debt relative to equity). To prevent this from occurring in an egregious manner, the Fed now runs regular "stress tests" to assess how much banks could lose – and therefore how much of a buffer they need in the form of shareholder equity.

In the spring, JP Morgan passed the latest Fed stress tests with flying colors. The Fed agreed to let JP Morgan increase its dividend and buy back shares (both of which reduce the value of shareholder equity on the books of the bank). Jamie Dimon received an official seal of approval. (Amazingly, Mr. Dimon indicated in his conference call on Thursday that the buybacks will continue; surely the Fed will step in to prevent this until the relevant losses have been capped.)

There was no hint in the stress tests that JP Morgan could be facing these kinds of potential losses. We still do not know the exact source of this disaster, but it appears to involve credit derivatives – and some reports point directly to credit default swaps (i.e., a form of insurance policy sold against losses in various kinds of debt.) Presumably there are problems with illiquid securities for which prices have fallen due to recent pressures in some markets and the general "risk-off" attitude – meaning that many investors prefer to reduce leverage and avoid high-yield/high-risk assets.

But global stress levels are not particularly high at present – certainly not compared to what they will be if the euro situation continues to spiral out of control. We are not at the end of a big global credit boom – we are still trying to recover from the last calamity. For JP Morgan to have incurred such losses at such a relatively mild part of the credit cycle is simply stunning.

The lessons from JP Morgan's losses are simple. Such banks have become too large and complex for management to control what is going on. The breakdown in internal governance is profound. The breakdown in external corporate governance is also complete — in any other industry, when faced with large losses incurred in such a haphazard way and under his direct personal supervision, the CEO would resign. No doubt Jamie Dimon will remain in place.

And the regulators also have no idea about what is going on. Attempts to oversee these banks in a sophisticated and nuanced way are not working.

The SAFE Banking Act, re-introduced by Senator Sherrod Brown on Wednesday, exactly hits the nail on the head. The discussion he instigated at the Senate Banking Committee hearing on Wednesday can only be described as prescient. Thought leaders such as Sheila Bair, Richard Fisher, and Tom Hoenig have been right all along about "too big to fail" banks (see my piece from the NYT.com on Thursday on SAFE and the growing consensus behind it).

The Financial Services Roundtable, in contrast, is spouting nonsense – they can only feel deeply embarrassed today. Continued opposition to the Volcker Rule invites ridicule. It is immaterial whether or not this particular set of trades by JP Morgan is classified as "proprietary"; all megabanks should be presumed incapable of managing their risks appropriately.

Dennis Kelleher and Better Markets are right about the broad need for implementing Dodd-Frank and they are particularly right about the problems that surround non-transparent derivatives (follow them @bettermarkets for some of the smartest lines and best links as the JP Morgan debacle continues to develop). The Better Markets press release on Thursday night put the entire situation in a nutshell:

"Jamie Dimon and JP Morgan Chase just proved what anyone not getting a paycheck from a Wall Street bank already knows: gigantic too-big-to-fail banks are too-big-to-manage."

Anat Admati and her colleagues at Stanford (and her growing band of supporters in the US and around the world) are right about bank capital. The people in charge of Federal Reserve policy in this regard are dead wrong – perhaps because they spend far too much time talking to Jamie Dimon and his fellow executives, while consistently refusing to engage with their better informed critics.

Ms. Admati skewered Jamie Dimon at length and in detail 18 months ago on exactly these issues. You must read her original Huffington Post piece. She has been relentless ever since – see this material. She was right then and she is right now: we need much higher capital requirements and much simpler rules – focus on limiting leverage. Big banks should be forced to become smaller – small enough and simple enough to fail.

It is time for the Federal Reserve to move its policy on these issues.

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Imperfect, OverReaching, Bonus-Driven Bankers

The Big Picture

The disclosure by once future Treasury Secretary and current JP Morgan CEO Jamie Dimon of a sudden and previously undisclosed $2 billion dollar derivative loss should be a wake up call. It unwittingly reveals much about the present state of finance:

• The inherent tension between traders using leveraged risk with Other People's Money in the pursuit of enormous bonuses is still weighed heavily towards excess risk taking;

• There is no bank in the United States that has demonstrated the ability to manage proprietary trading risks — if they use derivatives and/or leverage;

• It took less than 3 years after the financial crisis peaked for traders to engage in the same sorts of highly leveraged reckless speculative bets that helped crash the economy last time. Imagine the sorts of risks these mis-incentivized desks will be doing when the memories of the crisis fade 10 years after.

• Trades that are so enormous as to be "credit index distorting" are not hedges, but pure speculation. Within banks, apparently the word "Hedging" loosely translates as "speculation." Actual hedging of existing positions appears to be nonexistent.

• VaR remains a mostly useless concept as applied by banks today. It is a false model of reality whose deviations have devastating consequences. (Call it physics envy)

• At these size trades, the asymmetrical preference for bonuses over risk management is such that even clawbacks won't work;

• Jamie Dimon, formerly praised as the Capo di tutti capiof bank CEOs, apparently has been more lucky than brilliant. This quarter, his luck ran out.

• Derivatives, because of their enormous built in leverage, are inherently dangerous. They are still financial weapons of mass destruction;

• Too big to fail banks remain a threat to the stability of the global economy.

While this was "only" a $2 billion loss it easily could have been much greater. That banks such as JPM are still putting on trades that distort indices is quite bluntly, astonishing.

The solution to this risk is very very simple: The USA should reinstate Glass Steagall, and repeal the Commodity Futures Modernization Act.

Until that occurs, the risk of catastrophic failure remains present in the financial system.

~~~

Disclosure: Long JPM

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Thursday, May 10, 2012

Soaring Meat Consumption in China Has Global Implications

All Roads Lead to China

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After writing the piece China's Energy Gaps Create Opportunities last week, a few different articles came across my RSS reader that highlighted the need for a food post as well.

Food is one of those things that I do not think gets enough attention. There are certainly more than enough stories about food safety in China, largely byproducts of lacking investment on the farm and in the distribution chain, but it is China's reliance on imports that will become the story going forward. As the above articles suggest.

According to the Earth First article Meat Consumption in China Now Double That in the United States:

More than a quarter of all the meat produced worldwide is now eaten in China, and the country's 1.35 billion people are hungry for more. In 1978, China's meat consumption of 8 million tons was one third the U.S. consumption of 24 million tons. But by 1992, China had overtaken the United States as the world's leading meat consumer—and it has not looked back since. Now China's annual meat consumption of 71 million tons is more than double that in the United States.

Figures that are represented in the chart above, and highlight very quickly and concisely just how fast China's demand for meats is rising. A rise that is matched by the rising demand for inputs (seed, feed, fertilizer, etc), as the recent articles China's Sinograin may boost imports of U.S. corn and China Soybean Imports to Jump by 14% on Demand

It is a problem that is at the heart of the matter tied to regulation, farm policy, and the distribution of food, and is exacerbated by urbanization and economic development which are fueling demand. And beyond importing, where the opportunities are going to enter for solution providers are going to be (in my opinion) greatest on the farm and in the distribution system.

On the farm, perhaps the greatest shift that is taking place is the one where individual farmers, who are farming on average 660sqm of land, are consolidated through the legal frameworks set up a couple years back. This will be the core for future investment as farm land is bundled up, and is worked to such a scale that a single farmer (of business) is making decisions about the seed to be planted, fertilizers/ pesticides to be used, and means of harvesting/ storing the crop. Right now, it is a bit of every many for himself, where largely uneducated farmers are planning crops and buying seeds with little formal education on agriculture, there is no scale in the fields (i.e very 660 sqm is different), and to pump up yields the farmers through on 2-3 times the amount of fertilizer/ pesticide needed. A huge waste to the system, not to mention the impact to the water.

Which is operationally no different for livestock, aswe painfully learned through the melamine incident, but which I see every time I open up a carton of eggs and see varied sized, shape, and color.

The average farmer has no scale, and as a result is not only wasting inputs and more importantly, sees a huge variance in output as well. It is a market leaves a lot of room for firms looking at financing farm consolidations, farmer training, equipment, inputs, and storage. opportunities that have attracted the likes of Monsanto and Bayer, but have also attracted groups who are selling green houses, irrigation technology, and husbandry technology (live samples and more)

As highlighted by the WSJ article China Grows Its Dairy Farms With a Global Cattle Drive:

To encourage growth of big farms, the government has mandated that the country's top milk processors—those who buy from the farms and turn raw milk into boxed milk, yogurt, ice cream and cheese—purchase a substantial percentage of their milk from big farms.

Foreign companies and financiers have jumped on China's dairy bandwagon. Hong Kong-based private-equity firm Olympus Capital and Mueller Milch, a large German dairy, have invested in Chinese dairies. New Zealand dairy cooperative Fonterra, the world's biggest exporter of milk products, is building its third dairy farm in China stocked with Kiwi cows.

And by the article U.S. barnyards help China super-size food production :

Worldwide, the United States exported an all-time record of $664.1 million worth of live breeding animals, semen and livestock embryos last year, an 82 percent jump in two years, according to the U.S. Department of Agriculture's Foreign Agricultural Service. [...]

Last year, Chinese companies bought $41 million worth of live breeding animals and genetics – up nearly threefold from five years ago, according to USDA FAS.

The demand for breeder pigs, in particular, is zooming after China lifted a two-year ban on hogs and pork imports last spring. In the first two months of 2012 , China imported 62 percent of the total number of U.S. breeder pigs brought in for all of 2011.

With China facing increased pressure on all fronts it is an absolute certainty that China will have to modernize its food production and distribution systems, and as time grows more critical, the need for secure and safe sources of food are going to open up a lot of doors for solution providers.

For those of you who are interested in learning more about the wider context, or learn about the limits of China's agriculture, I highly suggest watching this clip on Youtube where Lester Brown gives a presentation entitled Perspectives on Limits to Growth: World on the Edge . He spends a lot of time on China

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Maid in Ethiopia

Baobab

IN LATE February 2012, Alem Dechasa, an Ethiopian maid working in Lebanon, was video-taped being beaten and dragged into a car. On March 14th, she committed suicide. Her story has drawn attention once again to the plight of migrant workers in the Middle East. But Ms Alem's fate has also highlighted a more unpleasant side of Ethiopia's impressive growth story.

Ethiopia's economy is based on small-scale agriculture. More than 85% of the country's 80m people live in the countryside. Most have limited or no access to such basics as clean drinking water, health-care facilities and education. Helen Gebresillassie, a lawyer who teaches at Stony Brook University's School of Social Welfare in New York and a former legal advisor to the Forum on Street Children in Ethiopia, an NGO, says that high inflation and market inefficiencies keep most farming household incomes so low that everyone must work, including children. When children are sent to school, parents worry about their daughters' safety getting there. More often boys get to study while girls are expected to do housework or get married.

With little education, young women in rural Ethiopia struggle to compete in the labour market. The only realistic employment opportunity for most of them is more of the same domestic work they have done their whole lives.

Ms Alem's case is not uncommon, explains Ms Gebresillassie. Traffickers specifically target uneducated and poor young women from rural areas in order to lure them to big cities in Ethiopia and the Middle East, she continues. That combined with the cultural expectation that children must help support their entire family means that young women are easy prey for traffickers' with their empty promises of higher income and a better life.

The Economist Intelligence Unit, our sister organisation, forecasts real GDP growth of 8% for Ethiopia in the fiscal year 2011/2012, mostly due to hikes in agricultural prices. That eclipses the OECD's predictions of less than 2% GDP growth for the same period. That bodes well for the country's future, but Ethiopia's government will need to ensure that growth rates are sustainable by cultivating one of the country's most valuable resources—its women.

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Dispensers for Safe Water in Haiti

Innovations for Poverty Action Blog

Lilian Lehmann and Alexandra Fielden

"Has anyone in your family had cholera in the last 6 months?" the surveyor asks. "Yes. Five. Wait, no, six" the head of the household responds. Another family member sitting on the front step of their straw-thatched hut chimes in, "No, no, it's seven."

While cholera in Haiti has received renewed media coverage in the past few days, following the launch of a new vaccination program, the situation itself is no longer really novel. For over a year and a half, humanitarian and development agencies have been struggling to respond to the devastating cholera outbreak that has so far claimed around 7,040 lives, and sickened more than 530,000.

Chlorine is the simplest, most effective water treatment option for killing the cholera bacteria and as such, the Haitian government recommended the chlorination of all drinking water in Haiti shortly following the outbreak.

Against this backdrop, the first IPA-designed chlorine dispenserswere installed in the rural foothills in the Ouest district of Haiti in January 2011. To use the dispenser, community members go to the water source, place their bucket under the dispenser, turn the valve to dispense chlorine, and then fill their bucket as they normally would with water from the source. The chlorine dispenser offers a more sustainable solution than the free, usually temporary emergency distribution of chlorine products. Moreover, the innovative point-of-collection treatment approach helps increase adoption by making water treatment convenient and easy, and the bulk supply significantly reduces supply costs.

An early evaluation of the first dispensers installed showed that all surveyed households using the water source had some residual chlorine in their drinking water, whether or not they had been observed using the dispenser technology that morning. However, those who had been observed using the dispenser, more frequently had the accurate dose of free chlorine residual in their household water.

Building on this success, a number of other organizations, including Oxfam America (whose program was covered recently by NPR) began incorporating dispensers into their WASH interventions. To date, IPA has provided dispenser hardware and technical assistance to six organizations on the ground in Haiti. There are currently 100 dispensers up and running, which provide access to safe water for approximately 20,000 people.

Fighting cholera requires a holistic approach and chlorine dispensers provide a complementary intervention to other WASH and public health programs – such as the cholera vaccine. There is significant interest in dispensers from the government and other large-scale organizations in Haiti already. IPA aims to work with partners to scale-up dispensers to provide access to safe water to one million people in Haiti over the next few years, providing a significant contribution to the ongoing battle against cholera.

For more information on IPA's chlorine dispensers, click here.

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Tuesday, May 8, 2012

Beyond Kony 2012

Texas in Africa

Longtime readers of this blog may note that I have showed uncharacteristic restraint in responding to Kony 2012 by, well, actually not posting on it at all. One reason for this is that the third year of the tenure track oh my word it is hectic and I have several actual scholarly articles coming out to prove it.

Another, better reason though is that thanks to the forward-thinking optimism of Wronging Rights' Amanda Taub, I wrote a chapter for a new ebook. Beyond Kony 2012, edited by Taub, is an attempt to educate journalists, educators, and anyone else wanting to learn more about the LRA crisis and how to effectively respond. There are several contributors from all over the world including many TIA favorites like TMS Ruge, Rebecca Hamilton, Adam Branch, Alanna Shaikh, and Daniel Kalinaki. All the contributors wrote with a critical eye (hint: none of us are big fans of the Invisible Children approach), but also with an eye to responding more effectively and understanding why previous efforts to stop Joseph Kony have failed.

My chapter in the book is entitled, "Avoiding Badvocacy: how to do no harm while doing good." I focus on the importance of listening to local voices, empowering communities to solve their own problem, and avoiding the temptation of making ourselves the saviors of African communities. I'd love to hear your feedbook on the chapter.

The suggested price to download Beyond Kony 2012 is $2.99, but if that's too much for your budget, you can download it for free with absolutely no guilt. It's available formatted as a PDF, MOBI (for Kindle), and as an ePub. I hope you'll take a look.

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My Daughter Will Be CEO of the World’s Most Valuable Company Someday

My Daughter Will Be CEO of the World's Most Valuable Company Someday

The Baseline Scenario

By James Kwak

At least, that's the impression I get from reading Walter Isaacson's biography of Steve Jobs, which I finally finished this weekend. It's not a particularly compelling read; it basically marches through the stages of his professional life, which is already the subject of legend, so there isn't much suspense. I fear that it will inspire a new generation of corporate executives to imitate all of Jobs's personal shortcomings—but without his genius.

The picture you get from the book is basically that Steve Jobs acted like a five-year-old for his whole life. He could be wrong about some basic, uncontroversial fact yet insist stubbornly that he was right. He divided the world into things that were great and things that were terrible, and his classifications could be arbitrary. He was an obnoxiously picky eater, constantly complaining about his food and sending it back. He threw epic tantrums that only a CEO (or a five-year-old) could get away with.

Some of his flaws, however, took more self-deception than a five-year-old is capable of. For example, when he came back to Apple in the late 1990s, he insisted he wasn't in it for the money and took the famous $1 salary. When the board offered him stock, he said he would rather have an airplane. The board gave him a Gulfstream V and 14 million options—and Jobs insisted on 20 million (which he got). When the stock market crashed, he got them repriced (leading to the Apple backdating scandal), and when the stock price kept falling, he eventually traded them in for an outright stock grant. Now, this is the behavior you expect from corporate CEOs, but it's a bit galling coming from someone who insisted, very publicly, that he didn't care about money.

For a similar example, Jobs refused to have a dedicated CEO parking spot at Apple headquarters—but he regularly parked in handicapped spots. What kind of a person does that?

But, of course, the results speak for themselves. And Isaacson's biography displays some of the traits that made Jobs such a successful businessman. He could have immense personal charm, when he wanted to. As Steve Wozniak said, "Steve could call up people he didn't know and make them do things." That ability, to get on the phone and talk someone else into do something that isn't in her interests, is what I consider the most important skill in business.

Jobs was also incredibly opinionated about his products, and his opinions were usually right. He was a compulsive micro-manager who almost always got his way, and the result is the world of personal computing we see around us, from touchscreen phones to the rounded windows in desktop operating systems.

What you don't see is any of the conventional management mumbo-jumbo that big-company CEOs spout to justify their fortunes—nothing about focusing on people, mentoring, creating a supportive work environment, giving people freedom but making them accountable, leading by following, etc. As I've said before, Steve Jobs violated just about every rule of generic company management. He succeeded because he had great product instincts, he was incredibly convincing, he was inspiring enough to get some great people to work for him, and he was a little bit crazy. In other words, he was the farthest thing you could find from the generic corporate executives who rule most of the business world.